US client losses dent WPP revenue

Advertising group WPP backed its 2019 guidance on Friday as it posted a rise in first-quarter revenue but a drop in like-for-like revenue due to "significant" client losses last year, mostly in the US.

Reported revenue was up 0.9% from the same period a year ago to £3.6bn, but LFL revenue declined 2.8%.

WPP said North America was the weakest performing region, with LFL sales there down 8.5% due to continued pressure and the impact of assignment losses among automotive, pharmaceutical and FMCG clients in 2018. It said that while disappointing, the performance was in line with its budgets and actions it has taken since September with its creative and healthcare agencies, alongside leadership changes, are intended to address its performance in the US.

In the UK, meanwhile, LFL revenue was down 0.9%, which was a slight decline on 2018's performance.

Chief executive Mark Read said: "As anticipated, our first quarter trading update reflects the impact of certain significant client losses in 2018, in particular in the United States. Although we face a challenging year, especially in the first half, I am encouraged by how well our people, agencies and clients are responding to our new strategic direction. Our expectations for the full year are unchanged."

For 2019, the group continues to expect LFL revenue less pass-through costs down 1.5% to 2%, with stronger headwinds in the first half due to client assignment losses in the latter part of 2018.

It also expects headline operating margin to revenue less pass-through costs down around 1.0 margin point on a constant currency basis.

WPP also said that the Kantar sale process is progressing well and it is pleased with the level of interest in the business from "high-quality" potential partners.

At 0945 BST, the shares were up 1.5% at 919.80p.

Russ Mould, investment director at AJ Bell, said that while the update might ring some alarm bells at first glance, this was more or less exactly what the market was expecting. He said "things are bad, but definitively no worse than feared".

"For now, that may be enough for chief executive Mark Read, a little over six months into the job having replaced WPP’s founder Martin Sorrell. He has been looking to keep a lid on expectations describing 2019 as a ‘foundational year’ in the turnaround of the business which faces competition from global consultancy firms on one hand and from digital giants like Google and Facebook who are looking to cut out the agency middlemen and deal directly with advertisers.

"He may get the grace of the next 12 months to lay the foundations for recovery but is likely to face pressure to get on with building WPP back up again as 2020 looms."